May 21, 2024

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South Africa: Universal Basic Income Grant – Who Should Run It?

6 min read

The sad history of Net1 and the Post Office shows that this is an important question

Public debate around a Universal Basic Income Grant (UBIG) has focused on fierce disagreements about its economic benefits, whether it is financially feasible for South Africa, and if so, what the value of the grant should be. As UBIG campaigning takes centre stage in the 2024 elections, Open Secrets asks an equally important but often overlooked question: who will administer the payment of those grants?

Any proposed UBIG in South Africa must address the issue of the grants payment system if it is to be fair and effective. The current failures of state administration of grant payments and the history of exploitation of grant recipients by private company Net 1 show the dangers of such an omission.

This article is the first instalment of a three-part series exploring this question. In it we focus on the debates surrounding the potential implementation of a UBIG, how the recent failure of state entities administering the grants payments system is an obstacle to a UBIG, and how the lack of recognition of these failures by political parties in their calls for a UBIG is a glaring gap.

The need for a Universal Basic Income Grant

A UBIG is a payment made to all people to help them meet basic needs. A truly universal income grant is made unconditionally, granted to all without requiring any work, activity, or means tests. Ultimately, it is a payment by the state, irrespective of a person’s situation or status.

The more common global practice is a basic income grant that is not universal, but that is paid to all people who fall below a certain income level. This is the current practice in Brazil, the first country in the world to have a law requiring the progressive implementation of a UBIG, and where the current basic income grant benefits over 50 million people.

International experience, including from Brazil, suggests that the grant is a highly effective means of addressing poverty, reducing inequality, and improving education, health and nutrition.

Arguments against the introduction of a UBIG – made most loudly by the National Treasury – are often linked to its alleged “unaffordability”. Senior Researcher at the Institute of Economic Justice (IEJ), Kelle Howson explains that: “One of the big arguments against a UBIG that comes from Treasury is the narrow view that increasing grants would mean they would need to increase tax, which would affect investment in South Africa and make the economy unstable”.

However, as the IEJ has argued, Treasury tends to overstate the cost of a UBIG while understating the resulting economic benefits that flow from a UBIG, including inevitable growth in local economic activity and the resulting recouping of many of the costs by the state.

Another argument is that a UBIG will create a reliance on state provided grants and lower the incentive to look for work. However, in places where a basic income grant has been introduced – including Namibia and Kenya – the opposite has occurred. The grant has helped people look for jobs or earn income through self-employment. In turn, this has contributed to local economies.

The South African government is using the R370-a-month Social Relief of Distress (SRD) grant as a testing ground for a proposed UBIG. However, this grant has only increased by R20 in April 2024 for the first time in four years, lagging far behind inflation, largely because National Treasury has insisted it was unaffordable.

The future implementation of a UBIG in South Africa will be complex. Even those advocating for a UBIG, differ in opinions on how it should look like. However, there seems to be a general consensus that the introduction of a UBIG must amount to or stand above the national lower-bound poverty line, which according to 2023 figures, currently sits at R 1,058 a month.

2024 election promises

Political parties across the ideological spectrum make mention of a UBIG or conditional income grant in their manifestos.

The ANC’s manifesto promises to increase the SRD grant with the intent to expand this to become a basic income grant over time.

The DA’s manifesto claims it will increase the SRD grant so that over time it becomes a basic income grant. However, the party has elsewhere said it would only investigate a BIG to determine if it was ‘affordable and viable’.

Rise Mzansi makes no mention of a UBIG in its manifesto but rather a “three month conditional job-seekers grant”, and says it prefers more “targeted” social assistance.

The Freedom Front Plus (FF+) manifesto states that the “masses have to rely on social grants” but do not outright commit to provide the grants, and elsewhere have described them as ‘unaffordable’.

ActionSA claims it will incrementally introduce a UBIG ‘stimulus’ over a period of 3 years.

The IFP promises to introduce a grant for unemployed graduates amounting to R3 000.

The EFF goes furthest, promising a R5,000 grant for unemployed graduates, and is making calls to double all current social grants.

Many of these manifesto claims are vague and the parties’ public comments usually go no further than a commitment to consider a basic income grant. Even where the positions are more concrete, none of the political parties go into detail about how they will fund these grants, nor do they provide any response to National Treasury’s apparent reluctance to increase grants.

Another important omission from these party promises is any analysis of who will be responsible for administering the payments of grants to recipients. Recent events have shown that the current grant payments system is in crisis, yet no political party’s manifesto mentions a way to address it.

The failures of SAPO and Postbank

In October 2022, following a formal information request, Black Sash and Centre for Applied Legal Studies (CALS) uncovered that the South African Social Security Agency (SASSA) had ‘ceded’ its contract with the South African Post Office (SAPO) to Postbank. The documents showed there was a failure to inform grant beneficiaries about the decision even though the migration process took three months.

From the outset of Postbank’s takeover of the contract, chaos struck South Africa’s grants payments system. Many recipients were unable to access their grants from November 2022 and continued experiencing ongoing problems into 2023.

On 6 January 2023, Postbank issued a statement announcing that their payments system had experienced a technical “glitch”. Postbank also experienced technical “glitches” in its administering of the SRD grant, which left beneficiaries unable to receive payments.

The so-called “glitches” were exacerbated by Postbank’s transition from a biometric system to a PIN system. Postbank’s system was also the target of fraud and cybercrime attacks, and irregular expenditure at the institution accounted for a loss of R118-million in November 2022. But despite this track record of poor governance, government insists on turning Postbank into a fully-fledged state bank.

In an interview, #PaytheGrants Deputy Chairperson, Elizabeth Raiters, told Open Secrets that while Postbank has seemingly addressed some of these issues in recent months, many beneficiaries still have difficulties with SASSA:

“Postbank has really improved over the past few months, things have been running more smoothly with the grants system. The ongoing issues with grant payments, especially with the SRD grant, are mainly because of SASSA’s very long verification process which also gets people’s information wrong.”

Whether at Postbank or SASSA, there has been little accountability regarding these issues. Grant applicants and recipients are regularly left in the dark by SASSA and the DSD, and are forced to approach civil society groups like #PaytheGrants and Black Sash for assistance. There is still no clear explanation of why Postbank was selected by SASSA and SAPO to administer grant payments, given its reputation of being unable to manage the technical constraints and challenges of its internal systems.

Postbank’s failures have given rise to the suggestion that the grants payments system should be administered by actors in the private sector. In practice, many financial and non-financial companies have already identified social grants as an opportunity to profit, and have entered the social grants payment space in various ways.

The next instalment in this series will discuss several of these private companies, and show why handing over grants payments to private actors presents serious risks to grant recipients.

*Open Secrets sent questions on the administration of social grant payments to the Department of Social Development, SASSA and the Postbank. They have yet to reply.

By GroundUp.

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